News
Meta to report Q2 earnings with ad sales and AI spending in mind
Facebook and Instagram parent Meta (GOAL) reports its second-quarter earnings after the market closes on Wednesday, and AI spending and the performance of the company’s advertising business are likely to take center stage.
AI spending is a key measure for Wall Street as investors eagerly await a return on Big Tech’s investments in the technology. During the previous quarter, Meta CFO Susan Li raised the company’s total annual spending estimate from $94 billion and $99 billion to between $96 billion and $99 billion.
For the second quarter, Meta is expected to report earnings per share of $4.74 on revenue of $38.3 billion, according to analyst estimates compiled by Bloomberg. Meta saw earnings per share of $2.98 on revenue of $31.9 billion during the same period last year.
Revenue from the company’s Family of Apps, which includes revenue from Facebook, Instagram, WhatsApp and Messenger, is expected to reach $37.7 billion, up from $31.7 billion in the second quarter of last year. Like Google, Meta could get a boost from publicity around this year’s election as well as the Olympics.
Meta CEO Mark Zuckerberg during an appearance at SIGGRAPH 2024 in Denver, Colorado (AP Photo/David Zalubowski) (ASSOCIATED PRESS)
“Meta enters its second-quarter earnings call in a position of strength,” Forrester vice president and research director Mike Proulx said ahead of the company’s earnings announcement.
“Expect to hear continued growth in Reels as Meta’s short-form video solution eats into TikTok’s market share. And while Threads has proven it can compete head-to-head with X, whether or not it can effectively monetize remains a question,” Proulx added.
Jefferies analyst Brent Thill offered a similarly positive outlook for Meta, writing in an investor note that the company’s intra-quarter checks remained bullish on the social media giant’s growth.
“Most experts we spoke to noted healthy ad budgets with ‘strong’ growth in Meta spend, though some are starting to see the impact of tougher policy [comparisons]”, said Thill.
While Meta’s advertising revenue appears set for a strong performance, that doesn’t mean every aspect of the company’s earnings report will be positive. Wall Street is still trying to determine how much longer tech companies will need to invest money in AI before they see some kind of revenue return.
Last week, CEO Mark Zuckerberg announced Meta’s latest open-source large language model (LLM), called Llama 3.1. Additionally, the Facebook founder said that the industry should focus on open-source AI instead of closed-source models like OpenAI’s ChatGPT.
“AI remains the dominant focus for Meta as the battle of the LLMs is just beginning,” Proulx said. “Expect mentions of the ‘metaverse’ or Horizon Worlds to be few to none during the earnings call.”
The story continues
Speaking of Meta’s Reality Labs segment, analysts predict the business will generate revenue of $376 million, up from $276 million in the same period in 2023. Still, Reality Labs continues to lose money.
In Q1, Meta reported that the segment, which is tasked with developing the hardware and software intended to power Zuckerberg’s metaverse dream, lost about $3.8 billion. The division has also been plagued by turnover and a lack of clear vision, adding to Reality Labs’ woes. Yahoo Finance’s Yasmin Khorram reported.
Meta’s announcement also comes after Texas Attorney General Ken Paxton announced Tuesday that he had secured a $1.4 billion settlement between the state and Meta over the company’s alleged use of Texans’ biometric data without their permission for its tag suggestions feature.
Subscribe to the Yahoo Finance Tech Newsletter. (Yahoo Finance)
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
Read the latest financial and business news from Yahoo Finance
StockStory aims to help individual investors outperform the market.